17 The scoring models have an output that is strictily a relative measure while

17 the scoring models have an output that is

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17) The scoring models have an output that is strictily a relative measure while profitability models  most of the times allow definitely go or no go decisions. Scoring models allow many criterias to be  used in order to make a decision including profitability models while these profitability models  ignore all nonmoneaty factors except risk. Is recommended to use scoring models for big projects  where budget is not the main constraint while profitability models are used when budget is  prioritized. (6 pts) Problems, pgs. 67-68     2, 3, 5 (just problem 3), 6, 7 2) Payback period = $200,000/ $30,000 = 6.7 years Average rate of return = $30,000 / $200,000 = 15%   3)  At an interest rate of 24% Investment Year 1 Year 2 Year 3 Year 4 CashFlow $(75k) 20k $25k $30k $50k PVIF 1 1.2 1.44 1.728 2.0736 PV $(75k) $16,667 $17,361 $17,361 $24,113 NPV $502 5) Discounted Cash  Outflow $75,000 Discounted Cash Inflow $75,502
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Profitability Index 1.007 6) Year Net Cash  Flow PVIF PV  0 -$65,000 1 -$65,000 1 $20,000 1.2 $16,667 2 $25,000 1.44 $17,361 3 $30,000 1.728 $17,361 4 $35,000 2.0736 $16,879 Yields an NPV of $3,268 7) TOTAL SCORES   SCORE       A B C Consulting costs 20 40 60 Acquisition time 40 60 20 Disruption 20 10 30 Cultural differences 30 30 20 Skill redundancies 20 10 10 Implementation risks 25 50 75 Infrastructure 20 20 20 TOTAL 175 220 235 Based on this, option C hast the highest score which suggests that this should be the best option.
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  • Spring '14
  • KimNeedy
  • Harshad number, Harry Connick, Jr., Project Selection Process, profitability models

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